Exit behaviour of investment companies: the choice of exit channel

Abstract

For investment companies, selling a portfolio company represents a critical phase in the investment life cycle. The choice of exit channel (initial public offering, secondary buyout, or trade sale) is of particular importance. This paper analyses factors relevant to exit channel selection, deploying a sample of 1,435 European buyout exits between 1992 and 2010. We differentiate between factors which refer to characteristics of the selling investment company and characteristics of the transaction object. Our analysis yields evidence that the reputation of the selling investment company, syndicate size, quality of the transaction object, as well as partial exit are associated with exit channel type. Moreover, our analysis reveals that the economic context and conditions in the capital markets significantly influence the choice of exit channel.